Clive Betts, Labour MP for Sheffield South East and widely respected chair of the Communities Select Committee, told MPs during the debate on the Leasehold and Freehold Reform Bill that the government could remove onerous ground rents from existing leases without breaching the European Court of Human Rights rules.
He did so in reference to the government now consulting on removing ground rents from existing leases, which all leaseholders should respond to, with a deadline of 17 January 2023.
This will be a subject addressed by the next meeting of the All-Party Parliamentary Group on leasehold reform on January 15, with expert legal opinion:
He said: “Returning to onerous ground rents, the Select Committee took counsel’s opinion, which was quite interesting, and made recommendations in paragraphs 114 to 116 of our report [Published in March 2019].
“There were two clear arguments why removing onerous ground rents from leases retrospectively was completely compatible with the European convention on human rights. The first, which most of us may not have thought about, is that controlling or changing rent is not confiscation of property but control of its use, so it does not conflict with the article on removing people’s property rights.
“Secondly, the convention includes a justification where the proposal has a wider beneficial impact on society, which can be offset against any impact on the property owner. Counsel’s opinion was that it was therefore perfectly justifiable under the European convention to remove onerous ground rents on existing properties.”
Unfortunately for leaseholders, the Select Committee also reported counsel’s view, p116, that “Freeholders would probably need to be compensated in order to ensure the legislation is compliant with human rights law. But that compensation need not necessarily be full value. The Government should undertake a comprehensive study of existing rents to determine the scale of the problem of onerous ground rents and the level of compensation which would be consistent with human rights law.”
Mr Betts made a number of detailed points about the Leasehold and Freehold Reform Bill on Monday.
First, he wanted the right of first refusal for leaseholders to apply whenever any freehold is sold.
He named Coppen Estates, active around South Yorkshire, as one of the more egregious freehold investors who “will not comply with any legislation, or will try to avoid it, do not reply to letters”.
LKP comment: It is astonishing that a public servant of the calibre of Clive Betts is being brushed off by some leasehold sector bottom-feeders like the Pennington family who own Coppen Estates. They should be far more famous. LKP reported a previous scandal below:
He wanted “a programme of education and information for leaseholders, to ensure a better understanding of what commonhold is all about”.
He urged right to manage to be strengthened “both for leaseholders and for freeholders [ie “fleecehold”] in these estates who own the freehold of their house but not of the communal areas.
“In all property purchases where common areas remain in private ownership, there should be, at the point of purchase, a clear understanding of the agreement between the local authority and the developer about who is responsible for those common areas. In many circumstances it is simply opaque. Often, purchasers do not know who is responsible and are sent on a wild goose chase to find out once they have bought their property.”
Mr Betts urged the government to include reforming forfeiture in the Bill.
“If leasehold is a feudal tenure, then forfeiture is prehistoric — it really is. If a leaseholder in a very small way fails to comply with an element of their lease, they could have the property taken off them. That is just unacceptable and unjustifiable.”
Mr Betts also asked why do freeholders not have to join a redress scheme? “The Committee called for them to be included in the redress schemes. The Secretary of State is bringing in a number of redress schemes and ombudsmen extensions, so why can freeholders not be included?”
He urged service charges to be formally protected in law: “Currently, many leaseholders have no idea what the money is being spent on. There is no obligation on the freeholder to explain it and certainly no protection that funds have to be used for the purpose for which they are paid.”
He also pointed out that his select committee has repeatedly called for a housing court, which is opposed by the government, “but I think we ought to keep asking. There are so many issues in the housing field that need a specialism, and need quick decisions and quick resolution. A housing court would be one way of doing that and of trying to improve the process”.
Finally, Mr Betts urged that developers and estate agents recommending conveyancing solicitors needs to be stopped:
“The solicitors were compliant in that [the ground rent scandal], because they had been recommended by the developer. Often, a bonus was thrown in: “We’ll give you new carpets in the living room if you use that solicitor.”
“The Competition and Markets Authority investigated at our request and said there was mis-selling, but so far nothing has been done about it … Can we not see something on that again?
“I do not think that there is any great conflict across the House, or between anyone who has been involved in this matter. It is wrong—absolutely wrong. Solicitors should not be induced in this way to provide conveyancing to a purchaser, when the developer is recommending that solicitor. It simply is not right and it needs addressing.”